Why in news?
The Securities and Exchange Board of India (SEBI) has given in‑principle approval for the creation of the Raajmarg Infrastructure Investment Trust. This trust will allow the National Highways Authority of India (NHAI) to pool investor funds and monetise its completed road projects. Banks such as the State Bank of India, Punjab National Bank and Bank of Maharashtra are set to hold a majority stake in the new entity. The approval is conditional on the trust meeting certain requirements within six months.
Background
An Infrastructure Investment Trust is similar to a mutual fund, but instead of buying stocks it invests in revenue‑generating infrastructure assets such as highways, transmission lines or pipelines. Investors purchase units of the trust and receive a share of the income generated by tolls or user fees. InvITs were introduced by SEBI to help companies raise long‑term capital without taking on excessive debt.
Key features of the Raajmarg InvIT
- Asset pool: The trust will include around fifteen completed highway stretches that are already earning toll revenue. These assets will be transferred from NHAI to the trust on a toll‑operate‑transfer basis.
- Investor participation: Public‑sector banks will collectively hold a majority stake, while NHAI will retain a 15 percent share. This mixed ownership aims to provide stability and attract institutional investors.
- Regulatory conditions: SEBI has stipulated that the trust must achieve financial closure and meet all listing norms within six months. It cannot invest more than 10 percent of its corpus in under‑construction projects.
- Returns for unit holders: Because the assets are operational, unit holders can expect a steady flow of income through toll receipts. The trust will distribute a large portion of its cash flows as dividends.
Significance
- Mobilising capital: By monetising operational road assets, NHAI can unlock funds to build new highways without increasing public debt.
- Diversifying investment avenues: InvITs provide long‑term investors such as pension funds and insurance companies with an opportunity to invest in infrastructure projects and earn predictable returns.
- Boosting infrastructure quality: Regular maintenance and efficient operation of roads are more likely when revenues are ring‑fenced and managed professionally through a trust structure.
Source: Press Information Bureau
